STZ 10-K & 10-Q changes, risk factors and insider trading

In addition to information discussed elsewhere in this Form 10-K, you should carefully consider the following factors, as well as additional factors not presently known to us or that we currently deem to be immaterial, which reflect our beliefs and opinions as to factors that could materially and adversely affect our business, liquidity, financial condition, and/or results of operations in future periods.periods, which may negatively impact the value of our securities. These factors, some of which have occurred and/or are occurring, and any of which could occur in the future, are not the only ones we face. References to past events are provided as examples only and are not intended to be a complete listing or representation as to whether such factors have occurred in the past or their likelihood of occurring in the future. The following factors are organized under relevant headings; however, they may be relevant to other headings as well.

Potential declines in the consumption of products we sell; dependence on sales of our Mexican beer brands

Our business depends upon consumers’ consumption of our beer, wine, and spirits brands,products, and sales of our Mexican beer brands in the U.S. represent the vast majority of our business. Consumer preferences, behaviors, perception, and sentiment may shift due to a variety of factors, including changes in taste preferences and leisure, dining, and beverage purchasing and consumption patterns, U.S. demographic trends, trends involving environmental sustainability and CSR matters, changing market dynamics, including consumer-led premiumization, moderation, and betterment trends, pricing, perceived value, branding, marketing, and reputational considerations, geopolitical events and tensions, trends involving environmental sustainability and CSR matters, and other negative trends impacting our products, business, and the entire beverage alcohol industry.industry, such as elevated product supply or inventory levels. Further, a limited or general decline in consumption in one or more of our product categories has occurred before and could occur again in the future due to a variety of factors, including:

•reduced consumption of beverage alcohol products, including as a result of consumers participating in fewer social occasions, stricter laws, such as those relating to consumption or driving while under the influence of alcohol, or resulting from consumer dietary preference changes, weight loss regimens and pharmaceuticals, including GLP-1 drugs, or consumers substituting legalized cannabis or hemp-derived or other similar products in lieu of beverage alcohol;

•increased activity from governmental entities, anti-alcohol groups, or other bodies, such as the World Health Organization and the former U.S. Surgeon General,Organization, advocating measures or guidelines designed to reduce or eliminate the consumption of beverage alcohol products or require more stringent labeling or warning requirements;

•possible restrictions on beverage alcohol advertising and marketing;

•the inabilityability of our wine and spirits business to becomeachieve along-term growth, including through portfolio repositioning, operational efficiency initiatives, and expansion of brands by leveraging global, omni-channel competitorcapabilities as well as ongoing wine and spirits category headwinds and continued inventory destocking by retailers; or

•wars or military conflicts, including the conflict in the Middle East, disease outbreaks or pandemics, quarantines, weather,severe weather events, and natural or man-made disasters, including wildfires, droughts, floods, extreme heat, and/or late frosts.

If these or any other factors cause or continue to cause a decline in the growth rate, amount, or profitability of sales of our Mexicanproducts, particularly our beer brands in the U.S.U.S., or any material shift in consumer preferences, behaviors, perception, and sentiment in our major markets away from our beer, wine, and spirits brands,products, and our Mexican beer brands in particular, or from the categories in which they compete, or if our financial or operational forecasts turn out to be inaccurate, it could adversely affect our business, liquidity, financial condition, and/or results of operations.

We also divest businesses, assets, or securities of companies from time to time, including those that we believe no longer provide a strategic fit with our business, such as the pending 2025 Wine Divestitures Transaction.Divestitures. We have provided andand, in the futurefuture, may provide various indemnifications in connection with divestitures of businesses or assets. Divestitures of portions of our business have also resulted and may continue to result in costs stranded in our remaining business. Delays in developing or implementing plans to address such costs could delay or prevent the accomplishment of our financial objectives, and we may be unsuccessful in partially or fully mitigating such costs. The failure to complete any planned divestitures may also result in negative business and financial results. The amount of contingent consideration, if any, received in divestitures may also vary based on various factors, including actual future brand performance.

We have acquired or retained ownership interests in companies which we do not control, such as our joint venture to operate the Glass Plant, our interest in Canopy, and investments made through our corporate venture capital function; and we have acquired control of companies which we did not wholly own. We have also acquired full ownership of companies that we partially owned, such as our acquisitions of the remaining ownership interests in Austin Cocktails, My Favorite Neighbor, and Nelson’s Green Brier. These types of transactions could occur again in the future. Our joint venture partners or the other parties that hold or may hold the remaining ownership interests in companies which we do not control may at any time have economic, business, or legal interests or goals that are inconsistent with our goals or the goals of the joint ventures or those companies. Our joint venture arrangements and the arrangements through which we acquired or hold our other equity or membership interests often require us to, among other matters, pay certain costs, make capital investments, fulfill alone our joint venture partners’ obligations, or purchase other parties’ interests. The entities in which we have an interest have been and may continue to be subject to litigation which may have an adverse impact on their ability to do business or under which they may incur costs and expenses which could have a material adverse impact on their operations or financial condition which, in turn, could negatively impact the value of our investment.

In addition, our continued success depends, in part, on our ability to develop and market new products. The launch and ongoing success of new products are inherently uncertain, especially with respect to consumer appeal and our ability to deliver optimized marketing in an evolving and dynamic media landscape, including through existing and emerging digital technologies, such as AI and data analytics. A new product launch can givegives rise to a variety of costs.costs which impact profitability. An unsuccessful launch can, among other things, affect consumer perception of existing brands and our reputation. Unsuccessful implementation or short-lived popularity of our product innovations has resulted and may in the future result in inventory write-offs and other costs.

We may not complete acquisitions, divestitures, or investments on our expected terms, conditions, and timetables, and we may not realize the expected benefits of acquisitions, divestitures, investments, or NPD. We have recognized significant impairment losses and/or write-offs in connection with acquired and divested businesses and investments, such as our recent Wine and Spirits and Canopy-related impairments, and we may do so again in the future. Furthermore, our acquisitions, investments, or joint ventures may not be profitable, our forecasts regarding acquisition, divestiture, or investmentthese activities may not be accurate, or the internal control over financial reporting of entities which we must consolidate as a result of our investment activities but do not control or wholly own may not be as robust as our internal control over financial reporting. Our failure to adequately manage the risks associated with acquisitions, divestitures, investments, or NPD, or the failure of an entity in which we have an equity or membership interest, could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights. We have been granted numerous trademark registrations and use certain trademarks under license covering our brands and products, and we have filed, and expect to continue to file or have filed on our behalf, trademark applications seeking to protect newly developed brands and products. We cannot be sure that trademarkTrademark registrations willmay not be issued with respect to any such trademark applications. We could also fail to timely renew or protect a trademark, and our competitorsothers could challenge, invalidate, or circumvent any existing or future trademarks issued to, or licensed by, us. We have been and may continue to be subject to litigation related to our trademarks and intellectual property rights. Litigation is inherently unpredictable and subject to substantial uncertainties and unfavorable developments and resolutions could occur. In addition, the amount of time and cost to defend ourselves could be substantial. A substantial adverse judgment or other unfavorable resolution of these matters or our failure to otherwise protect our intellectual property rights as well as the costs associated with such activities could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

•actions we may take to enhance or safeguard our reputation and uphold our core values, including changes or activities related to our workforce, operations, sales, advertising, marketing, and NPD;

•allegations that we, or persons currently or formerly employed by or associated with us, have allegedly or actually violated applicable laws or regulations, including those related to safety, employment, discrimination, harassment, whistleblowing, privacy,privacy and data protection, corporate citizenship, improper business practices, or cybersecurity, or have otherwise engaged in negatively perceived activities;

•geopolitical events and tensions and associated negative impacts on our products and business;

•our environmental impact, including the use of agricultural and other raw materials, water, and energy, packaging, and waste management;

Various stakeholders have expressed widely divergent views on environmental sustainability, social, human capital, and governance-related matters, among others, and we are faced with conflicting expectations and regulations regarding such matters which has inhibited and may continue to inhibit our ability to achieve a consistently positive perception across our entire stakeholder base. Failure to comply with applicable laws and regulations, maintain an effective system of internal controls, provide accurate and timely financial information, or protect our information systems against service interruptions, theft, or misappropriation of data, or breaches of security, could also hurt our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, as well as require additional resources to rebuild our reputation, competitive position, and brand equity and renew investor confidence.

We operate in a highly competitive and constantly evolving industry, and our sales and/or profitability have been and could continue to be negatively affected by numerous factors, including:

•our inability to maintain or increase prices or develop successful new products and the impact of price reductions on certain products;

•our inability to adopt or effectively deploy existing, new, and/or emerging technologiestechnologies, including AI;

•the decision of wholesalers,existing retailers,or potential Customers or consumers to purchase competitors’ products instead of ours, including due to competitive pricing pressures;

•pricing, purchasing, financing, operating, advertising, or promotional and shelf space decisions made by wholesalers,existing stateor andpotential local agencies, and retailersCustomers as well as in DTC channels which may affect supply of or consumer demand for our products;

•a general decline in beverage alcohol consumption or changes in consumer preferences away from our products, including due to consumer dietary preference changes, weight loss regimens, pharmaceuticals, or consumers substituting legalized cannabis or hemp-derived or other similar products in lieu of beverage alcohol; or

Our continued success also depends on our ability to attract and retain a high-quality and inclusive workforce in a competitive environment for talent and to implement our human capital strategy, priorities, and initiatives. We could experience higher expenses to deliver on our human capital strategy, priorities, and initiatives, such as for investment in our personnel, including due to employee turnover, wage inflation, and/or other current or emerging employment trends, particularly in the U.S., to defend ourselves in investigations or against existing or new litigation, or for other reasons. We may be unable to increase our prices to pass along any increased costs we incur to our customers.Customers.

We have production facilities in the U.S., Mexico, New Zealand, and Italy and employees in various countries, and our products are sold in numerous countries. The countries in which we operate impose duties, excise taxes, and/or other taxes on beverage alcohol products, and/or on certain raw materials used to produce our beverage alcohol products in varying amounts. Governmental bodies may propose changes to international trade agreements, treaties, tariffs, taxes, and other government rules and regulationsregulations, including but not limited to environmental treaties and regulations. Recent developmentsDevelopments in international trade relations, including significant changes in U.S. trade policy and actions which include threatened, new, and increased tariffs on other countries and retaliatory tariffs and actions imposed on certain U.S. goods, such as the tariffs on product imports from certain countries (such as Mexico, the European Union including Italy, and New Zealand) imposed by the U.S. government in April 2025, tariffs implemented by certain other countries on U.S. goods, such as the tariffs on certain product imports originating from the U.S. imposed by the Canadian government in March 2025, and subsequent modifications and delays to the various tariffs,relations have produced heightened uncertainty with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alterimpact the global trade environment.environment and tariff rates applicable to goods we or our suppliers import and export. These developments include:

Significant new or increased tariffs, import and excise duties, or other taxes on or impacting beverage alcohol products, including raw and packaging materials, particularly on imports from Mexico, Italy, and New Zealand, and any additional retaliatory tariffs and actions imposed by those governments on product imports from the U.S., could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations. Meanwhile, escalating geopolitical tensionsevents, tensions, and trade disputes, have resulted and may continue to result in additional sanctions, tariffs, import-export restrictions, boycotts, or trade wars. These activities, when combined with any retaliatory actions that have or may be taken by other countries, have impacted and could continue to pose a significant risk to our business as well as the global economy, such as by shifting consumer behaviors, inhibiting sales, increasing costs, causing further economic and supply chain disruptions (including impacts on prices and supply of certain commodities, such as aluminum,aluminum and aluminum derivatives, corn, crude oil, natural gas, and steel) and inflationary pressures, and reducing economic activity. The extent and duration of tariffs and the resulting impactsimpacts, including on general economic conditions; and the aforementioned risks, stock, credit, and capital market volatility;volatility, and our business are uncertain and depend on various factors, many of which are out of our control.

In addition, governmental agencies extensively regulate the beverage alcohol products industry concerning such matters as licensing, warehousing, trade and pricing practices, permitted and required labeling, advertising, and relations with wholesalers and retailers. Certain regulations also require warning labels and signage. We may be subject to new or revised regulations, increased licensing fees, requirements, or taxes, regulatory enforcement actions, or longer review periods for applicable regulatory approvals. Additionally, various jurisdictions may seek to adopt significant additional product labeling or warning requirements, limitations, or guidelines on the marketing or sale of our products because of what our products contain or allegations that our products cause adverse health effects. If these types of requirements become applicable to one or more of our major products under current or future laws or regulations, they may inhibit sales of such products or increase our costs. These uncertainties and changes, as well as the decisions, policies, and economic strength of our suppliers and distributors, could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

We have substantial brewery operations in Mexico and substantialMexico, wine operations in the U.S. (primarily in California), New Zealand, and Italy as well as breweryItaly, and distillery operations in the U.S. California has endured and may continue to experience prolonged drought conditions which have resulted in the imposition of certain restrictions on water usage and whichthat could recur. Over the last several years, certainCertain areas of California have also experienced wildfires and flooding.flooding in recent years. If these conditions or restrictions persist and/or increase in severity, it could have an adverse effect upon those operations. The water supplies for our current Mexican breweries and the Veracruz Brewery,breweries, which originate from separate and distinct aquifers, are subject to disruption which could impact our ability to produce our products. Mexico recently reformed certain laws related to water rights, which altered the country’s regulatory framework governing water resources. Among the changes were a prohibition on the transfer of water concessions between private parties, elimination of the private secondary market for concessions, and new sanctions for water-related violations. The sources of water, methods of water delivery, water quality, or water needs to support our ongoing requirements may change materially in the future. We may incur additional expenses for improving water delivery, quality, and efficiency as well as for; securing additionalsufficient water sources.sources and supplies; and compliance with legal requirements.

Our breweries, the Glass Plant, our wineries, and our distilleries use a large volume of agricultural and other raw materials to produce our products. These include corn starch and sugars, malt, hops, fruits, yeast, and water for our breweries; soda ash and silica sand for the Glass Plant; grapes and water for our wineries; and grain and water for our distilleries. Our breweries, wineries, and distilleries all use large amounts of various packaging materials, including glass, aluminum, cardboard, and other paper products. Our production facilities also use electricity, natural gas, and diesel fuel in addition to renewable energy sources in their operations. Certain raw materials and packaging materials are purchased under contracts of varying maturities. The supply, on-time availability, and pricecost of raw, packaging, and other materials, energy, and other commodities have been and may continue to be affected by many factors beyond our control, including economic factors, tariffs,legal and regulatory requirements, including tariffs and extended producer responsibility and post-consumer recycled content obligations, supply chain disruptions, inflationary pressures, market demand, global geopolitical events and tensions, wars, military conflicts, including the conflict in the Middle East, weather events or natural or man-made disasters, including droughts, storms, and wildfires, plant diseases, and theft.

Our breweries, wineries, and distilleries are also dependent upon an adequate supply of glass bottles. Glass bottle costs are one of our largest components of cost of product sold. The Glass Plant produces a majority of the total annual glass bottle supply for our Mexican beer brands, and we have a small number of other suppliers of glass bottles for our Mexican beer brands. At times, we have experienced glass bottle purchasing shortages.shortages, which could occur again in the future. Meanwhile, we have two aluminum can suppliers that provide all of our total annual requirements for our Mexican beer brands, with one of those suppliers providing a majority of suchour aluminum can requirements. In the U.S., glass bottles have only a small number of producers.producers, Currently,and one producer supplies a majority of our glass container requirements for our U.S. wine and spirits operations.

We depend on IT to enable us to operate efficiently and interface with customers,Customers, suppliers, and consumers, maintain financial accuracy and efficiency, and effect accurate and timely governmental reporting, among other activities. If we do not allocate and effectively manage the resources to build and sustain appropriate technology infrastructure, including our global enterprise resource planning system and our planned unified finance platform implementation,platform, we could be subject to transaction or data integrity errors, processing inefficiencies, increased costs, loss of customers,Customers, business disruptions, loss of or damage to intellectual property or proprietary information, including through a security breach, penalties associated with the failure to timely file governmental reports, and/or other difficulties. Many groups on a worldwide basis have experienced increases in electronic security breaches, cyberattacks, and other hacking activities such as phishing attacks, denial of service, malware, ransomware, and cyber extortion, and there is the possibility of retaliatory cyberattacks, including by state-sponsored organizations. As with all large IT systems, we have been a target of cyberattackers and other hacking activities and our systems could be penetrated by increasingly sophisticated external or internal threat actors (including through the use of existing and emerging technologies, such as AI) intent on extracting confidential or proprietary information, corrupting our information, disrupting our business processes, engaging in the unauthorized use of strategic information about us or our employees, customers,Customers, or consumers, or demanding monetary payment. Such unauthorized access could disrupt our operations and result in various costs and adverse consequences, including the loss of assets, decreased sales, litigation, regulatory actions, remediation costs, increased cybersecurity protection costs, damage to our reputation, harm to our employees, or the failure by us to retain or attract customersCustomers or consumers following such an event.

We have outsourced various functions to third-party service providersproviders, including cloud-based technology providers, and may outsource other functions in the future. We rely on such third-parties to provide services on a timely and effective basis, but we do not ultimately control their performance. In addition, our distributors, wholesalers,Customers, suppliers, joint venture partners, and other external business partners utilize their own IT systems that are subject to similar risks to us as described above. Their failure to perform as expected or as required by contract, or additional cyberattacks on them that disrupts their systems, could result in significant disruptions and costs to our operations or, in the case of third-party service providers, a penetration of our systems.

The swift pace of technological change has led to a nonuniform and complex set of cybersecurity and data privacy laws, regulations, and standards. Meanwhile, the recent proliferation and rapid evolution of AI technologies, including generative AI andAI, machine learning, and agentic AI, has resulted in new challenges, including business, legal and regulatory, and ethical considerations and uncertainty. For example, the use of AI technologies without adequate safeguards could produce flawed or inaccurate recommendations, suggestions, or outcomes or other unintended results or potential vulnerabilities or expose us to liability or adverse legal or regulatory consequences. AI technologies may also intensify the risk of threat actors using such technologies to enhance their capabilities. We have implemented a governance framework that includes policies and processes to address the use of AI technologies by our employees and third-party service providers. Nevertheless, ourOur employees and third-party service providers may not follow ourthe governance framework,framework addressing the use of AI technologies we implemented, including if such providers incorporate AI technologies into their products or systems without disclosing this use to us. We expect that our continued success will depend, in part, on our and our third-party service providers’ ability to continue to effectively leverage existing and emerging technologies, such as AI and data analytics, to gain relevant insights and enhance our business. These circumstances may create risks in our ability to address existing or rapidly developing regulatory or industry standards related to AI technologies and data privacy and to successfully and responsibly utilize AI technologies.

To the extent any of the foregoing factors result in significant disruptions and costs to our operations, fail to produce the anticipated benefits, compromise confidential or sensitive information, imperil our intellectual property, result in harm to our reputation and the public perception of the effectiveness of our IT systems and cybersecurity measures, result in litigation or regulatory actions, and/or reduce the effectiveness of our internal control over financial reporting, it could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.

available,result mayin cost substantially more,litigation or mayregulatory takeactions, aand/or significantreduce timethe to start production, anyeffectiveness of whichour internal control over financial reporting, it could have a material adverse effect on our product supply, business, liquidity, financial condition, and/or results of operations.

Our internal management financial reporting consists of two business divisions: (i) Beer and (ii) Wine and Spirits and we report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our Mexican beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio thatcomprised includesof exclusively higher-end wine brands complemented by certain higher-endand spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate communications, corporate development, corporate finance, corporate strategy and growth,strategy, executive management, human resources, internal audit, investor relations, IT, legal, and public affairs, as well as our Canopyinvestments investmentsuch andas investmentsthose made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our CODM’s evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting.

In connection with continued negative trends within our Wine and Spirits business primarily attributable to our U.S. wholesale market, driven by declines in both the overall wine market and in our then-owned mainstream and premium wine brands, management updated its Fiscal 2025 outlook and latest financial projections for this reporting unit. Based on the aforementioned factors, we performed an interim quantitative assessment, as of August 31, 2024, and ana Fiscal 2025 annual quantitative assessment for goodwill impairment which resulted in a $2,740.7 million total goodwill impairment and the carrying value being written down to zero. This loss was included in goodwill and intangible assets impairment within our consolidated results for Fiscal 2025. See Notes 8, 9, and 14 for further discussion.

In connection with the assessment of the same events and circumstances that resulted in the wine and spirits goodwill carrying value being written down to zero, we completed a quantitative assessment of our wine trademarks. As a result, we recognized a $57.0 million trademark impairment on certain then-existing held for sale wine brands. This loss was included in goodwill and intangible assets impairment within our consolidated results of operations for Fiscal 2025. See Note 78 for further discussion.

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including as a leader in the high-end segment, and continuing to seek to grow our high-end imported beer brands through maintenance of leading margins, enhancements to our results of operations and operating cash flow, and exploring new avenues for growth. In Fiscal 2026,2027, we intend to continue to increase distribution for key brands, optimize growth through differentiated brand positioning, price pack architecture, and market prioritization,prioritization as well as continue to invest in the next phase of modular capacity additions necessary to support our ongoinganticipated future growth. Expansion,Modular optimization,capacity and/or constructionaddition activities continue under our Mexico BeerBrewery Projects to align with our anticipated future growth expectations, and we expect to spend approximately $2 billion over Fiscal 2026 through Fiscal 2028 largely on these activities.growth. See “Capital Expenditures” below. Additionally, we continue to focus on consumer-led innovation by creating new line extensions behind celebrated, trusted brands and package formats, as well as new to world brands, that are intended to meet emerging needs.

Our business strategy for the Wine and Spirits segment continues to focus on delivering growthlong-term andgrowth. improving margins beyond Fiscal 2026 by drivingWith our higher-end brands and operating efficiencies. We are repositioning this business to a portfolio of exclusively higher-end winebrands and spiritsour continued focus on operational efficiencies, we remain committed to improving margins and driving growth. We intend to expand our brands that we believe will generate higher growth and higher margins, including through the recently announced 2025 Wine Divestitures Transaction. We remain a key supplier inacross U.S. 3-tier brick-and-mortar distribution. In addition, we are advancing our aim to become a global, omni-channel competitor in line with evolving consumer preferences as we continue our efforts to progressively expand intowholesale, international markets, and DTC channels (including hospitality), andto 3-tiermaximize eCommerce.our total addressable market opportunity by leveraging our global, omni-channel capabilities. We have a contractual arrangement with Southern Glazer’s Wine and Spirits which consolidated our U.S. distribution and currently represents approximatelynearly 60%70% of our U.S. branded wine and spirits volume.

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to continue to achieve comparable earnings per share growth as well as our target ratios for (i) comparable net leverage and (ii) dividend payout; investing to support the growth of our business; and delivering additional returns to stockholders through periodic share repurchases. Our results of operations and financial condition have been and may continue to be affected by anthe dynamic and evolving consumer demand environment largely driven by whatongoing weeconomic believeuncertainty toand beadditional non-structuralheadwinds from other socioeconomic factors. These factors include subdued spend, value-seeking behaviors, and reductions in the discretionary income available to purchase our products among consumers, elevated unemployment, changing prices, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, and geopolitical events, as well as retailer destocking impacting our Wine and Spirits segment.

Developments in international trade relations, including significant additional changes in U.S. trade policy and actions which may include threatened, new, and increased tariffs imposed by the U.S. government on other countries, retaliatory tariffs and actions imposed on certain U.S. goodsgoods, and subsequent modifications and delays to or invalidation of various tariffs as well as associated litigation and developments have produced heightened uncertainty with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on certain product imports from certain countries (such as Mexico, the European Unionimports, including Italy,on aluminum and Newaluminum Zealand)derivatives, and certain other countries have implemented tariffs and other actions on U.S. goods, such as theboycotts and tariffs on certain product imports originating from the U.S. imposed by the Canadian government,federal and some provincial governments and retaliatory tariffs in other international markets, although some of these tariffs were subsequently modifiedmodified, delayed, suspended, or delayed.invalidated. Various tariffs and other actions negatively impacted our Fiscal 2026 results of operations. In April 2026, the U.S. government removed beer made from malt, which includes our beer products, from the scope of the Section 232 aluminum and aluminum derivative tariffs that had been in place at various rates since February 2025.

We expect some or all of these market conditions and their impacts to continue into Fiscal 20262027 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the dynamic and evolving consumer demand and economicsocioeconomic environments and their impacts on our business. In addition, we have implementedexecuted the majority of the work associated the 2025 Restructuring Initiative, which is an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business, including through enhanced organizational efficiency and optimized expenditures across our organization. We also intend to continue our commodity and foreign exchange hedging programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost savings,cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

We have implemented the 2025 Restructuring Initiative which is expected to beyield completedover $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative was executed within Fiscal 20262026. andThe 2025 Restructuring Initiative is now estimated to result in $80nearly million to $100$130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $46.9$72.2 million of pre-tax employee termination costs and $2.8 million of pre-tax consulting servicesrestructuring costs in Fiscal 20252026 and we anticipate incurring an additional approximately $40$121.9 million of cumulative pre-tax consulting services, employee termination, and other costs duringsince Fiscalthe 2026.inception Theof Fiscalthis 2025initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, see Note 2.3.

CraftSVEDKA Beer DivestituresDivestiture

On January 6, 2025, we sold the SVEDKA brand and related assets, primarily including inventory and equipment. We received $409.2 million of cash proceeds, subject to certain post-closing adjustments, which were used for general corporate purposes, including funding share repurchases, capital expenditures, and repayment of debt. Prior to the completion of the SVEDKA Divestiture, we recorded the results of operations of the SVEDKA brand in the Wine and Spirits segment. For Fiscal 2025, we recognized a $266.0 million net gain in connection with this divestiture which was included in gain (loss) on sale of business within our consolidated results.

In June 2024, we acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility. This transaction also included the acquisition of goodwill, inventory, and a trademark. The results of operations of Sea Smoke are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.

As of August 31, 2025, February 28, 2025, August 31, 2024, November 30, 2023, and August 31, 2023,2024, we evaluated certain equity method investments and other securities measured at fair value, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformanceunderperformance, for the respective periods. These losses from impairment and on securities measured at fair value were included in income (loss) from unconsolidated investments within our consolidated results for the respective periods. In October 2023, we exited one of these equity method investments in exchange for a note receivable.

Exchangeable Shares —

Additionally,We asown 26.3 million Exchangeable Shares. As of November 30, 2024, we evaluated theour Exchangeable Shares for impairment primarily due to the business and industry factors that led to the decline in Canopy’s common share price since the dateApril 2024 conversion of our then-existing Canopy common shares and exchange of a portion of the principal amount of a then-existing promissory note issued to us by Canopy for Exchangeable Shares. Following the April 2024 conversion and exchange.exchange, Wewe concluded thatrecognized an impairmentinitial did$83.3 existmillion andnet wrotegain downbased on the fair value of our Exchangeable Shares to their estimated fair value.Shares. Due to the continued decline in Canopy’s common share price, as of February 28, 2025, we evaluated theour Exchangeable Shares for an additional impairment. We concluded that an impairment did exist, and accordingly, theour Exchangeable Shares were written down to their estimated fair value,value of $21.2 million, resulting in a $76.1 million total impairment for Fiscal 2025.

The Exchangeabletotal Share$7.2 activity for Fiscal 2025 resulted in a totalmillion net gain ofin $7.2connection millionwith whichour Exchangeable Shares was included in income (loss) from unconsolidated investments within our consolidated results.results for Fiscal 2025.

References to organic throughout the following discussion exclude the impactimpacts of the 2025 Wine Divestitures and the SVEDKA Divestiture, collectively referred to as the “Wine and Spirits Divestitures,” where appropriate.

•Net sales increaseddecreased 2%10% largely due to an(i) increasethe loss of net sales as a result of the Wine and Spirits Divestitures, (ii) a decrease in Beer net sales driven primarily by a shipment volume growthdecline; andpartially offset by a favorable impact from pricing, partiallyand offset by(iii) a decline in organic Wine and Spirits net sales driven primarilyled by a decrease in branded shipment volume.volume decline.

•Net income (loss) attributable to CBI and diluted net income (loss) per common share attributable to CBI each decreased 105%increased largely due to the items discussed above,above and a decrease in interest expense, partially offset by (i) a benefitFiscal from2026 provision for income taxes as compared to a provisionFiscal for2025 benefit from income taxes for Fiscal 2024, (ii) no longer recognizing equity losses from Canopy’s results following the conversion of our Canopy common shares to Exchangeable Shares, and (iii) a Fiscal 2024 impairment of our then-existing Canopy Equity Method Investment.taxes.

This section provides a description of our strategy, including our 2025 Restructuring Initiative, and a discussion of a recent development and certain acquisitionsacquisitions, divestitures, and divestitures.investments.

This section provides an analysis of our results of operations presented on a business segment basis for the three months ended MayAugust 31, 2026, and MayAugust 31, 2025, and six months ended August 31, 2026, and August 31, 2025. In addition, a brief description of certain transactions and other items that affect the comparability of the results is provided.

We are an international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy with powerful, consumer-connected, high-quality brands like Modelo Especial, Corona Extra, Pacifico, Victoria, Kim Crawford, Ruffino, The Prisoner Wine Company, Robert Mondavi Winery, Mi CAMPO, and High West. In the U.S., we are one of the top dollar share gainers among beverage alcohol suppliers. We are also the second-largest beer company and have the #1 beer brand, Modelo Especial, in dollar sales in the U.S. We continued to strengthen our leadership position in the U.S. beer market as the #1 dollar share gainer in the overall U.S. beer market and the #2 dollar share gainer in the high-end. Within wine and spirits, we have implemented a multi-year strategy that

and the #2 dollar share gainer in the high-end. Within wine and spirits, we have implemented a multi-year strategy that repositioned this business to a portfolio of exclusively higher-end brands that we believe is positioned for long-term growth, aligned to our focus on consumer-led premiumization trends, and we continue to progressively expand our supply channels through DTC and international markets. The strength of our brands makes us a supplier of choice to many of our consumers and our Customers, which include wholesale distributors and retailers. We conduct our business through entities we wholly own as well as through a variety of joint ventures and other entities.

Our overall strategic vision is to consistently deliver industry-leading total stockholder returns over the long-term through a focus on these key pillarselements:

We will continue to strive for success by ensuring consumer-led decision making drives all aspects of our business; building a strong talent pipeline with best-in-class people development; investing in infrastructure that supports and enables our business, including data systems and architecture; and exemplifying intentional and proactive fiscal management. We place focus on positioning our portfolio on higher-margin, higher-growth categories of the beverage alcohol industry to align with our strategy to address consumer-led premiumization, product, and purchasing trends, which we anticipate will continue to drive stronger growth rates relative to the industry. To capitalize on these ongoing trends and evolving consumer occasions and preferences, we will continue to employ our strategy dedicated to organic growth of our existing portfolio, supplemented by targeted investmentscommercial and acquisitions.operational Ourstrategies, ongoingwith digital acceleration initiatives are aimed at driving results by enhancing our technology, data, and digital capabilities in key areas. Additionally, we believe our continueda focus on maintainingcapturing aadditional stronggrowth balanceopportunities sheetby provideswinning awith solidmore financialconsumers foundationacross more occasions. The strategic priorities to support our broadernext strategicphase initiatives.of growth are organized around three distinct pillars:

Our business strategy for the Beer segment focuses on upholding our leadership position in the U.S. beer market, including as a leader in the high-end segment, and continuing to seek to grow our high-end imported beer brands through maintenance of leading margins, enhancements to our results of operations and operating cash flow, and exploring new avenues for growth. In Fiscal 2027,Additionally, we intend to continue to increaseinvest distributionin forthe keynext brands,phase of modular capacity additions necessary to support our anticipated future growth with activities under our Brewery Projects. We now expect commercial production at the Veracruz Brewery to commence at the beginning of Fiscal 2028.

We remain committed to our long-term financial model of: growing sales, expanding margins, and increasing cash flow in order to continue to achieve comparable earnings per share growth as well as our target ratios for (i) comparable net leverage and (ii) dividend payout; investing to support the growth of our business; and delivering additional returns to stockholders through periodic share repurchases. Our results of operations and financial condition have been and may continue to be affected by the dynamic and evolving consumer environment largely driven by ongoing economic uncertainty and additional headwinds from other socioeconomic factors. These factors impacting consumers may include subdued spend, depressed sentiment, value-seeking behaviors, higher consumer prices and reductions in the discretionary income available to purchase our products among consumers,products, including from increased gasfuel prices, elevated unemployment, inflation, other unfavorable global and regional economic conditions, demographic trends in the U.S., global supply chain disruptions and constraints, geopolitical events and tensions, wars, and military conflicts, including the conflict in the Middle East.

Developments in international trade relations, including significant additional changes in U.S. trade policy and actions which may include threatened, new, and increased tariffs imposed by the U.S. government on other countries, retaliatory tariffs and actions imposed on certain U.S. goods, and subsequent modifications and delays to or invalidation of various tariffs as well as associated litigation and developments have produced heightened uncertainty with respect to trade and tariff policies and regulations affecting trade between the U.S. and other countries, which could continue to alter the global trade environment. For example, the U.S. government has imposed tariffs on certain product imports, including on aluminum and aluminum derivatives, and certain other countries have implemented tariffs and other actions on U.S. goods, such as boycotts and tariffs on certain product imports originating from the U.S. imposed by the Canadian federal and some provincial governments and retaliatory tariffs in other international markets, although some of these tariffs were subsequently modified, delayed, suspended, or invalidated. Various tariffs and other actions negatively impacted our results of operations for Fiscal 2026 and Firstare Quarterexpected 2027to resultscontinue ofto operations.have a negative impact for Fiscal 2027. In April 2026, the U.S. government removed beer made from malt, which includes our beer products, from the scope of the Section 232 aluminum and aluminum derivative tariffs that had been in place at various rates since February 2025.

We expect some or all of these market conditions and their impacts to continue during the remainder of Fiscal 2027 which could have a material impact on our results of operations and financial condition. We intend to continue to monitor the dynamic and evolving consumer and socioeconomic environments and their impacts on our business. In addition, we have executed the majority of the work associated with the 2025 Restructuring Initiative, which is an enterprise-wide cost savings and restructuring initiative designed to help optimize the performance of our business, including through enhanced organizational efficiency and optimized expenditures across our organization. We also intend to continue our commodity and foreign exchange hedging programs. However, there can be no assurance that we will be able to adequately respond to softer consumer demand trends or fully mitigate rising costs, including as a result of new or increased tariffs, through increased selling prices, cost, productivity, efficiency, and inventory management initiatives, optimized marketing plans, and/or our commodity and foreign exchange hedging programs. Furthermore, to the extent severe weather events that impact our business, such as wildfires, droughts, floods, extreme heat, and/or late frosts, or other weather conditions that constrain purchasing occasions for our consumers, continue to occur or accelerate in future periods, it could have a material impact on our results of operations and financial condition.

We have implemented the 2025 Restructuring Initiative which is expected to yield over $200 million in net annualized cost savings by Fiscal 2028. The majority of the work associated with the 2025 Restructuring Initiative was executed within Fiscal 2026. The 2025 Restructuring Initiative is estimated to result in nearly $130 million of cumulative pre-tax costs once all phases are fully implemented. In connection with the 2025 Restructuring Initiative, we recognized $0.6$5.5 million of pre-tax restructuring costs in FirstSix QuarterMonths 2027 and $122.5$127.4 million of cumulative pre-tax costs since the inception of this initiative. These costs were included in selling, general, and administrative costs within our consolidated results. For additional information on the 2025 Restructuring Initiative, refer to Note 2.

AcquisitionsAcquisitions, Divestitures, and DivestituresInvestments

On June 2, 2025, we sold and, in certain instances, exclusively licensed the trademarks of a portion of our wine and spirits business, primarily centered around our then-owned mainstream wine brands and associated inventory, wineries, vineyards, offices, and facilities. We received $845.9$846.5 million of cash proceeds, which were used for the repayment of debt. This divestiture supports our strategic focus on consumer-led premiumization trends and meeting the evolving needs of our consumers.

For additional information on these acquisitionsacquisitions, divestitures, and divestituresinvestments refer to NoteNotes 5 and 6.

FirstSecond Quarter 2027 compared to FirstSecond Quarter 2026

Net income attributable to CBI and diluted net income per common share attributable to CBI increased 27%21% and 31%,25%, respectively, largelyprimarily due to a lower provision for income taxes, partially offset by the items discussed above.

Strategic business reconfiguration costs, netcosts

We recognized net(i) costs primarily in connection with lossesactivities on write-downs of excess inventory resulting from our initiativesintended to streamline operations, improve efficiencies, and reduce our cost structure primarily within our Wine and Spirits(ii) segment.a loss on settlement of a receivable related to the sale of a previously-owned facility (Second Quarter 2027, Six Months 2027).

We recognized other gains (losses) primarilylargely asdue ofto result ofa net lossesgain from the sales of businesses.assets (Second Quarter 2026, Six Months 2026).

We recognized (i) an impairmentimpairments on assets held for sale associated with management’s plan to divest the Nelson’s Green Brier business (Second Quarter 2027, Six Months 2027) and on then-existing net assets held for sale in connection with the New Zealand Wine Divestitures (FirstSix QuarterMonths 2027) and (ii) contract liabilities and inventory obsolescence expenses associated with the 2025 Wine Divestitures, partially offset by changes in the carrying value of those then-existing net assets held for sale (FirstSix QuarterMonths 2026). For additional information, refer to Note 5.

FirstSecond Quarter 2027 compared to FirstSecond Quarter 2026

The increase in Beer net sales is largely due to (i) $40.7$130.2 million of shipment volume growthgrowth, as distributors sought to rebuild inventory days-on-hand and (ii) $17.6$12.8 million of favorable impact from pricing in select markets, partially offset by $9.3$14.4 million of unfavorable product mix primarily from a shift in package types. While our shipment volume growth benefited from consumer demand, we believe our net sales continued to be impacted by the economic uncertainty and socioeconomic factors discussed above.